Raytheon regularly places among the Pentagon’s top 10 prime contractors. Its air/land/sea defense offerings include reconnaissance, targeting, and navigation systems, as well as missile systems (Patriot, Sidewinder, and Tomahawk), unmanned ground and aerial systems, sensing, and radars. Additionally, the company makes systems for communications (satellite) and intelligence, radios, cybersecurity, and air traffic control. It also offers commercial electronics products and services, as well as food safety processing technologies.
The U.S. government accounts for around 88% of sales. Integrated Defense Systems and Missile Systems are the largest dollar sales segments with Network Centric Systems and Space & Airborne Systems not far behind. In fact, these four segments make up 82% of sales. Integrated Defense provides the highest operating margins (15.5%), with Network Centric and Space & Airborne not far behind (14.0% and 14.1%).
The company was founded in 1922 and is based in Waltham, Mass. Its competitors include Boeing, Lockheed Martin, and Northrop Grumman. Compared to 2008, its 2009 sales grew 7.4%, its pretax income jumped 16.2%, and its R&D increased 9.3%.
The U.S. Air Force awarded Raytheon’s IIS segment a contract to develop the next-generation ground control stations for GPS. Known as GPS OCX, the program will provide anti-jam capabilities to fighter jets, ensure future air traffic control systems, and facilitate the advancement of commercial GPS applications. IIS also had strong bookings on a number of classified contracts during the quarter, including a major classified program. The segment is very solid and continues to grow.
The company’s IDS business delivered good growth and strong margins. The U.S. Navy awarded initial funding for the third Zumwalt ship (Fig. 5), a meaningful step toward addressing any questions about the outlook of this successful program. It’s performing well, and the advance technologies that Raytheon is developing will support the U.S. Navy and other navies in the long-term future.
The Missile Systems segment booked a major classified program in addition to a number of significant bookings for the Missile Defense Agency, the U.S. Navy, and the U.S. Army, as well as international customers.
Also, Raytheon won a contract with the Office of Naval Research to continue its cutting-edge work on the Compound Semiconductor Materials On Silicon (COSMOS) program. The company will be able to deliver even more affordable sensor systems, while continually delivering world class performance.
In Cybersecurity, it won a contract to provide critical experimentation and test for the U.S. government’s cyber security capabilities. It also was awarded the final phase of the Defense Advanced Research Projects Agency (DARPA) contract to develop speech and language processing technologies to recognize, analyze, and translate speech and text into readable English in real time.
The bulk of the growth in Cybersecurity is expected in 2011 as some smaller programs start to bear fruit. Raytheon is using what it does internally with its own systems to prevent “zero day intrusions” to develop products for the commercial market on a larger scale.
International sales are growing at a double-digit clip with Cybersecurity a strong factor, and they are expected to make up around 24% of total sales in 2010. There is strong, broad-based international demand for each of Raytheon’s businesses, innovative solutions, and technologies. For example, SAS booked a contract for the production of advanced electronics systems for the Egyptian Air Force F16 fighter jets.
Raytheon continues to pursue “out of the box” projects such as Tempwave. In California, it has an experimental one-acre orange grove where it is testing a technology to raise the temperature in a clean, “green” manner to eliminate the problem of frost for fruit and vegetable growers. If it works, the company sees a huge market opportunity in the U.S. and already has strong interest from Canada.